Sun Oct 23 01:45:20 SAST 2016

soaring prices

By unknown | May 29, 2008 | COMMENTS [ 0 ]

Robert Laing

Robert Laing

Hopes that inflation peaked in March have been dashed by April's data.

The figure used by the Reserve Bank for interest rate decisions, the year-on-year consumer price index excluding mortgages (CPIX), accelerated to 10,4percent from 10,1percent in March.

The consensus among economists had been that April's CPIX would decline slightly.

They now forecast inflation will only peak in August, making another 0,5percent interest rate hike inevitable when the Reserve Bank's Monetary Policy Committee announces its next decision on June 12.

A June interest rate hike would take the central bank's repo rate to 12percent, and in turn the commercial banks' prime rate to 15,5percent.

April's 67 cents per litre price increase caused petrol to leap the highest month-on-month. Year-on-year, petrol came second to vegetable oil whose prices have soared with the growth of the biofuel industry.

Food remained the biggest contributor to April's inflation. Statistics South Africa's average food basket was 15,7percent more expensive than in April last year.

Once again, the poor and the wealthy were hardest hit. The "very low expenditure group" food basket went up 16,8percent versus 15,1percent for the "very high expenditure group".

Vegetables got 14,6percent more expensive while meat got 8,1percent pricier.

The only good news in yesterday's inflation data was that fruit and nuts showed a 0,1percent decline from March, taking its inflation to 12,8percent for the year.

Worryingly, meat, vegetables and sugar prices all rose from April after declining the two prior months.

Relentless petrol and diesel price increases over the past year saw transport inflation hit 15,6percent.

While there has been slight deflation in vehicle prices, the cost of maintaining cars showed the third biggest increase both month-on-month and yearon-year.

While mortgages are excluded from CPIX, the Bank's nine interest rate hikes over the past two years caused housing to tie with transport in second place in contribution to the overall CPI of 11,1percent.


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